Coca-Cola Buys Minority Stake in Suja Life -- Update
August 19 2015 - 5:30PM
Dow Jones News
By Mike Esterl
Coca-Cola Co. is wading into the small but fast-growing niche of
organic, cold-pressed juices by acquiring a minority stake in Suja
Life LLC.
Wednesday's announced investment marks the latest
diversification move by Coke, whose sales have slowed as
health-conscious consumers scale back on soda, which still
represents about 70% of company revenue.
The beverage giant also is trying to tap into growing consumer
thirst for fresher, less-processed fruit and vegetable juices. Suja
uses non-GMO ingredients and is among a small number of national
brands such as Starbucks Corp.'s Evolution Fresh and Hain Celestial
Group Inc.'s BluePrint that use high pressure instead of heat
pasteurization to kill bacteria.
Cold pressing helps beverages retain more of their nutritional
value and "is probably as close to raw" as packaged juice products
"are ever going to get," industry tracker Euromonitor International
wrote in a recent report.
New juice brands also are benefiting from consumers tiring of
traditional mainstays like orange or tomato juice. Suja's
top-selling flavor is Mighty Greens, which contains 14 ingredients
including apple, kale and alfalfa grass.
Coke is paying roughly $90 million for a nearly 30% stake in San
Diego-based Suja, with an option to buy all of the company after
three years, according to a people familiar with the matter. The
merchant banking arm of Goldman Sachs also agreed to pay about $60
million for a 20% stake, valuing the closely held company at about
$300 million.
Suja says it booked $42 million in sales last year--a drop in
the bucket for Coke, which reported $46 billion in revenue and
whose billion-dollar brands include Sprite soda, Dasani water and
Powerade sports drinks in addition to its namesake cola.
But Suja--whose juices also include combinations such as
strawberry and flax seed--has posted rapid growth since being
launched in 2012 and its sales more than doubled last year from
2013. The company's namesake juices also fetch higher prices than
mainstream brands, selling for $4 to $8 a bottle. how many
ounces?
Suja co-founder and Chief Executive Jeff Church said the
company's beverages are sold in about 12,000 stores in the U.S.,
including Whole Foods, Costco and Kroger, but that he expects to
double that number by next year with Coke's help.
"We decided we needed a partner to help us with distribution and
greater leverage from a cost standpoint," Mr. Church said in an
interview.
Following the deal with Coke and Goldman Sachs, Suja's four
founders will own about 25% of the company and Boulder Brands Inc.
another 5%. Other individual investors--which include actors
Leonardo DiCaprio and Sofia Vergara--will own the remaining
20%.
Coke's Minute Maid and Simply brands and chief beverage rival
PepsiCo Inc.'s Tropicana brand already dominate mainstream
offerings like orange juice.
Coke acquired Odwalla Inc., a premium juice maker, in 2001 for
about $180 million. But Odwalla has fallen behind Naked Juice, a
competing premium brand that PepsiCo acquired in 2006. Suja will be
transported on Odwalla's refrigerated trucks.
In a statement Wednesday, Coke said Suja "will nicely complement
our broad portfolio" and that it plans to use its unmatched
distribution system to expand its availability.
In recent years Coke acquired minority stakes in the makers of
Zico coconut water and Honest Tea, an organic tea, before assuming
control. Earlier this year it began a national rollout of the
premium-priced milk brand Fairlife, which has more protein and
fewer calories than regular milk, after forming a joint venture
with Select Milk Producers.
Coke also has spent more than $4 billion since last year to
acquire minority stakes in coffee machine maker Keurig Green
Mountain Inc. and energy drink maker Monster Beverage Corp.
Write to Mike Esterl at mike.esterl@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 19, 2015 17:15 ET (21:15 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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